Canadian Immigration Surge Worsening Outlook for Housing Affordability

The immigration surge in Canada is exacerbating housing affordability concerns. National Bank economist Stéfane Marion warns that the working-age population rose sharply by over 100,000 in April 2024, a 47% increase compared to the same period in 2023.[1] This acceleration in population growth, particularly in major cities like Toronto, Montreal, and Vancouver, is attributed to people rushing to immigrate before potential limits in 2025.[1] Consequently, housing affordability problems could worsen in the coming quarters as Canada heads for another record year of population growth.

BMO's top investment strategist, Brian Belski, raised the firm's S&P/TSX price target to 24,500, reflecting improving sentiment and revision trends, which are expected to drive valuation expansion. Despite the target increase, Belski maintains a cautious outlook, with the implied P/E ratio still below the long-term average.

RBC Capital Markets analyst Darko Mihelic remains uncertain about the domestic bank stocks' outlook, citing concerns over credit quality and the ongoing mortgage renewal shock.[1] While valuation appears attractive, Mihelic lacks confidence in forecasts for net interest margins, loan growth, and provisions for credit losses in 2025, suggesting Q2/24 results may not alleviate these concerns.

Barclays' Venu Krishna addressed key investor questions, including the firm's constructive view on Big Tech due to defensible margins and earnings growth potential. Krishna believes broadening market participation could be catalyzed by earnings growth and that equities can still perform well even without rate cuts in 2024, as long as inflation moderates. However, Krishna warns that stagflation, though unlikely, could catch markets off guard.

Morgan Stanley's research highlighted the cybersecurity subsector, with CrowdStrike, Palo Alto Networks, Verisign, and CyberArk cited as beneficiaries based on feedback from the RSA conference.  Identity Management, Endpoint, and Data Security were areas of strength, while firewall spending underwent a digestion period.